The No. 1 question I am asked today — especially by home buyers — is “are we going to see foreclosures and short sales come back? Will the housing market crash like it did back in 2008?” The answer is NO.
Even with COVID 19, record unemployment, and the uncertainty of an upcoming election, there is nothing that indicates that the Phoenix metro housing market isn’t going to continue to remain strong. Things may slow and prices level out, which wouldn’t be a bad thing, as we can’t keep going at the pace we have been.
The current median sales price has increased 16 percent from the same time last year. We don’t expect the frenzy we are in now to continue into next year, but we don’t expect the market to stop either — just slow down and get back to a more normal pace.
The crash of 2008 was caused by a global financial crisis, resulting in a housing bubble. Due to deregulation in the financial industry, banks were able to engage in hedge fund trading and demanded more mortgages to support this profitable side of the business. Subprime borrowers were given interest-only loans in order to be able to qualify and many unqualified borrowers were given loans they would never be able to repay. In a nutshell, if you could breath you could get a loan.
As soon as supply started to outpace demand, housing prices started plummeting. The bubble had burst, leaving many homeowners unable to make their balloon payments, upside down on their mortgages, and with no way to sell their homes.
Jump to 2020 and our housing market is completely the opposite of how it was in 2008. The financial industry is now heavily regulated and as anyone who has purchased a home since then will tell you, getting a mortgage is a lot more cumbersome. Lenders are required to verify that borrowers have the ability to repay a loan and provide proof of income and assets.
Home prices are continuing to increase and prices are driven by supply and demand. While we expect the market to soften once the government stimulus packages are gone, some of the furloughed workers become unemployed, and foreclosures are filed again, we have such an imbalance of supply and demand that the Arizona housing market is expected to remain strong. More buyers are flocking to Arizona, new home builders cannot build fast enough to keep up with the increase in population, and Maricopa remains the No. 1 growing county in the U.S.
The charts here show the difference in our market today versus 2008.
Please feel free to contact me if you would like more information on the housing market or have any questions.
There isn’t a better time to sell than right now. If you are thinking of selling, contact me today for a no obligation home value and marketing plan.
Lorraine is a Multi-Million Dollar producing agent, has been a full-time Realtor for over 12 years, is an Associate Broker of KOR Properties, a Certified Negotiation Specialist, and is on the Professional Standards Board. You can reach Lorraine at (602) 571-6799.